China should not fear slower growth
Both Beijing and the world should adapt to a new normal
After 30 years of high-speed economic growth, potential productivity in China has dropped. So said a senior Chinese official, speaking this week. If true, his statement marks the end of a period that has transformed both China and the global economy.
Of course, this is slow growth with Chinese characteristics. The country is still projected to grow by 7.5 per cent this year far faster than any of the other of the worlds five largest economies. Since China is now the worlds second-largest economy, growth at this pace still implies an enormous addition of both capacity and demand. Talk of a slump in global demand for commodities or luxury goods or cars is premature.
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In fact, an era of relatively slower growth in China is welcome news both for the country and the global economy. The governments previous insistence that it must achieve growth of at least 8 per cent a year betrayed a neurotic insecurity about social unrest. It has also involved increasingly unacceptable environmental and social costs as anybody breathing the choking Beijing air can testify. President Xi Jinpings statement last week that Chinas model of development is not sustainable was a sign of political maturity.
The development model China now needs to modify was overdependent on exports and state-driven infrastructure investment. Recently, it has been fuelled by an excessively rapid rise in credit. In the aftermath of the Great Recession, the west is no longer in a position to absorb an ever-increasing supply of Chinese exports. China must generate more of its own demand. That is why rapidly rising wages for Chinas manufacturing workers are good news.
China bears argue that higher pay for factory hands points to an erosion of the countrys competitiveness. In fact, it signals that the fruits of economic growth may now be shared more widely. Chinese workers with more money in their pockets will also mean that China is less dependent on external demand. That, in turn, should lessen the trade tensions that have threatened to provoke protectionism in the west. A China that is no longer obsessed with racking up the fastest growth rate possible should also be able to pay more attention to acute environmental problems.
Handled intelligently, the end of Chinas era of high-speed economic growth could lead to a greener planet and a more balanced global economy. That is surely to be welcomed.
Both Beijing and the world should adapt to a new normal
After 30 years of high-speed economic growth, potential productivity in China has dropped. So said a senior Chinese official, speaking this week. If true, his statement marks the end of a period that has transformed both China and the global economy.
Of course, this is slow growth with Chinese characteristics. The country is still projected to grow by 7.5 per cent this year far faster than any of the other of the worlds five largest economies. Since China is now the worlds second-largest economy, growth at this pace still implies an enormous addition of both capacity and demand. Talk of a slump in global demand for commodities or luxury goods or cars is premature.
High quality global journalism requires investment. Please share this article with others using the link below, do not cut & paste the article. See our Ts&Cs and Copyright Policy for more detail. Email ftsales.support@ft.com to buy additional rights. China should not fear slower growth - FT.com
In fact, an era of relatively slower growth in China is welcome news both for the country and the global economy. The governments previous insistence that it must achieve growth of at least 8 per cent a year betrayed a neurotic insecurity about social unrest. It has also involved increasingly unacceptable environmental and social costs as anybody breathing the choking Beijing air can testify. President Xi Jinpings statement last week that Chinas model of development is not sustainable was a sign of political maturity.
The development model China now needs to modify was overdependent on exports and state-driven infrastructure investment. Recently, it has been fuelled by an excessively rapid rise in credit. In the aftermath of the Great Recession, the west is no longer in a position to absorb an ever-increasing supply of Chinese exports. China must generate more of its own demand. That is why rapidly rising wages for Chinas manufacturing workers are good news.
China bears argue that higher pay for factory hands points to an erosion of the countrys competitiveness. In fact, it signals that the fruits of economic growth may now be shared more widely. Chinese workers with more money in their pockets will also mean that China is less dependent on external demand. That, in turn, should lessen the trade tensions that have threatened to provoke protectionism in the west. A China that is no longer obsessed with racking up the fastest growth rate possible should also be able to pay more attention to acute environmental problems.
Handled intelligently, the end of Chinas era of high-speed economic growth could lead to a greener planet and a more balanced global economy. That is surely to be welcomed.
